By William Warren Davis
This paper attempts to explore two recent statistics used to identify jumps in stock prices, as well as to propose a modification to one of the statistics to increase its accuracy by adding a second stage with a different estimator of local volatility. After identifying potential jump days, a study of Bristol-Myers Squibb Co. stock was performed, identifying the types of company-specific events that occurred on these days that seemed to cause jumps in the price. Also, the new proposed statistic was found to be more accurate by a using method of changing the significance levels used in each stage, as well as in samples with an extremely high jump frequency.
Advisor: George Tauchen
